Description
University of Sunderland
PGBM135 Global Strategy and Foresight London
Canvas Submission Deadline: Assessment 01 – Report: Thursday 8th February 2024 by 2pm
Canvas Submission Deadline: Assessment 02 Poster/Infographic/Slides Date (Week 8): Monday 11th December 2023 by 2pm
Module Leader: Alessandro Ferrazza
Introduction: This module is assessed by two separate assignments:
Assessment 1 – a case study based coursework
Assessment 2 – Poster/Infographic/Slides Presentation.
Assessment 1 (80% weighting)
Case study based Individual coursework with a word guideline of 4000 words (plus or minus 10%)
Case – Compass Group Plc.
Compass Group has made an incredible journey since its start in 1941 as “Factory Canteens Ltd”. Bateman Catering and Midland Catering were acquired by Grand Metropolitan in 1967 and 1968 respectively and a management buy-out from Grand Metropolitan followed in 1987 when the Compass Group was formed. The many companies that have joined Compass have contributed to the rich heritage and shaped the personality of the business today. Whilst Compass Group has come a long way from these humble beginnings to become the international business they are now, the commitment of their people to their customers, the quality of the service and the spirit of innovation remain a constant and ongoing feature of the company’s development.
Compass Group Plc provides food and support services to customers in the workplace, in schools and colleges, hospitals, at leisure and in remote environments. It operates in following sectors: Business and Industry, Education, Healthcare and Seniors, Sports and Leisure, Defense, Offshore and Remote. Compass Group was founded in 1941 and is headquartered in Chertsey, the United Kingdom.“
Compass Group was first listed on the London Stock Exchange in 1988. Eurest, one of the company’s US subsidiaries, was launched in the USA in 1996 to provide dining services to local, regional and national companies within the Business & Industry markets, including employee dining centers, on-site catering, vending, executive dining rooms, and other managed services.
Compass Group became the World’s biggest catering firm by 2005. Meanwhile ESS was contracted by the U.S. Marine Corps, the 82nd Airborne Division, the British Ministry of Defence, the Coalition Provisional Authority, along with the major defense contractors Fluor, RMS, Bechtel, and most notably KBR (a subsidiary of Halliburton) under the U.S. Army troop support contract called LOGCAP III to provide dining and construction services at desert bases and encampments in Kuwait and Iraq from the start of operations in 2003 to 2006.
In April 2006 Compass Group sold its roadside and travel catering businesses for a combined £1.82 billion. The transaction included the sale of 43 Moto motorway service areas to Australia’s Macquarie Bank for an estimated £600m. Compass’s Select Service Partners (SSP) travel concessions business was sold to companies controlled by private equity firm EQT Partners, for an estimated £1.2 billion. The company made further acquisitions in 2009 including Kimco and Lackmans in the USA, Plural in Germany and several McColls retail site leases in the UK. Please visit Compass Group Plc website https://www.compass-group.co.uk/, you are advised to update the case study will relevant, current sources from the online library and credible media.
Structure
You are required to answer the following THREE questions that pertains to the case – Compass Group Plc. For further details on Compass Group Plc, you may refer to the Problem Based Learning case presented in week 2. It is also recommended that you research information additional to the case study to support your arguments. This may be obtained from a diverse range of sources and you are encouraged to research the issues in whichever way you deem appropriate.
Question One: Sources of Competitive Advantage and its relevance to management
Critically review the theories of competitive advantage and evaluate their relevance to management. In particular, discuss how such theories could inform Compass Group Leadership Team in their quest to gain sustainable competitive advantage.
Question Two: Firm’s strategy and strategic position
Critically review the relationship between organisational resources, external environment and firm performance. Use Compass Group Plc as an illustration in your discussion.
Question Three: The role of innovation and internationalisation in a firm’s Competitive Advantage
Evaluate the relevance of innovation and internationalisation in designing and implementing Compass Group Plc strategy/competitive position
Answer
- Introduction
With the growing complexity, critical uncertainty, rapid change and competition in the global market place, organisations are expected to design business approaches and competitive moves to compete successfully, please customers and achieve the desired organisational levels (Barney & Hesterly, 2015). As such, companies should conduct environmental scanning, formulate strategy, implement and monitor the strategy, evaluate as well as review the implementation process to ensure efficient and effective accomplishments of the long term objectives of the organisation. According to Johnson et al. (2017), the most important aspect regarding strategy is the need for management to craft proactively how the business in an organisation will be conducted. A clear strategy is the management’s prescription for doing business, its competitiveness roadmap, its game plan to please customers as well as to enhance financial performance (Barney & Hesterly, 2015).
Compass Group is a market leading food and support services company. it is the largest contract foodservice company in the world and services in over 90 countries. The company servers around 4 billion meals a year in locations such as offices and factories, schools, universities, hospitals, major sports and cultural venues, mining camps and offshore oil platforms. Compass group objective is to deliver value to its shareholders and customers by leveraging the benefits of being a group to deliver structured and sustainable organic growth and achieve our vision to be a world-class provider of food and support services.
This report takes the case of Compass Group in assessing its global strategy. The first section critically evaluate competitive advantage theories and their relevance to management, particularly in informing the Compass Group Leadership Team’s quest for sustainable competitive advantage. The second section evaluates the strategy and strategic position of Compass group through critically reviewing the relationship between its resources, the external environment and its performance. Lastly, the report analyses the role of innovation and internationalization in a firm’s competitive advantage.
2.1 The concept of competitive advantage
Competitive advantage is concerned with the superiority that a company achieves when it can provide a similar value to customers at comparatively lower prices as compared to its competitors (Sook-Ling et al., 2015). On the other hand, Albrecht et al. (2015) demonstrate that competitive advantage occurs when a firm can create more value economically than its rivals where economic value represents the difference between the perceived benefits that customers derive from consuming an organisation’s products and the cost of production of a firm. Likewise, West et al. (2015) see competitive advantage as an aspect that enables firms to perform better as compared to their competitors in the market. All these definitions boils down to one point that an organisation is said to have competitive advantage if it can create more value economically as compared to its potential, indirect and direct competitors.
2.2 Critical review of theories of competitive advantage
Various scholars have offered different theories that seek to explain why an enterprise can create more value than competitors in the market. According to Strandskov (2006), the three competitive advantage sources of a business include Firm Specific Advantages (FSAs), Relationship Specific Advantages (RSAs) and Localisation Specific Advantages (LSAs). Firm specific advantages are the competencies and resources that have been specifically developed for a particular firm thereby creating competitive edge (Mao et al., 2016). These capabilities and resources are differentiated and unique to a specific firm even though they may be operating in a similar industry. On the other hand, relationship specific advantages are the competencies and resources that are attained by a firm due to the business ties with other firms (Strandskov, 2006). Albrecht et al. (2015) holds that an organisation can acquire key capabilities and competencies through effective relationship between the firm and its clients or suppliers. West et al. (2015) further elaborate that interrelationship between an organisation and its associates can create a distinctive brand. Further, localisation specific advantages are the wider dynamics in the industry that are influenced by the environment directly (Strandskov, 2006). They entail factors such as industry competition, factors of production like labour and capital etc.
Nevertheless, Brem et al. (2016) provides a different view regarding competitive advantage theories. Brem et al. (2016) reveal that the competitive advantage sources can be classified into three categories including perceived customer benefits, capabilities and resources. However, Sook-Ling et al. (2015) holds that these three categories offer competitive advantages only when they can offer value proposition to an organisation which provides a lot of benefits to the consumers compared to an organisation’s rivals.
Additionally, another competitive advantage theory is the (RBV) resource based view. Bromiley & Rau (2016) explain that in the theory of RBV, competitiveness is created from the internal competencies of an entity. Kellermanns et al. (2016) highlight that there are different internal capabilities that can create competitive edge to an organisation including human resources, technological capacity, skills and financial strengths. According to Johnson et al. (2017), these resources and competencies can be categorised further as tangible and intangible resources. Arguably, tangible resources are entities’ physical possessions such as land, raw materials and buildings while intangible resources are organisation’s unique possessions such as knowledge, innovation, brand and an organisational culture (Bromiley & Rau, 2016). West et al. (2015) provides that tangible resources are not effective in achieving the competitiveness of an organisation when they are not utilised accordingly. Barney & Hesterly (2015) further highlight that intangible resources are used commonly to realise the competitive edge of an entity since they are difficult to imitate and replicate and they are unique to a particular company.
Nonetheless, the opinions offered in the above theories cannot be convincing because entities operate in a versatile environment. For instance, in the case of localisation specific advantages, while the benefits can be seen, the aspects creating competitiveness may also bring adverse effects to the organisation (Strandskov, 2006).
2.3 Relevance of theories of competitive advantage to the management
Accordingly, identification of a competitive advantage offers numerous benefits to an organisation’s management. Firstly, competitive advantage analysis enables an organisation’s management to understand the resources and possession that enables it to achieve competitiveness (Eloranta & Turunen, 2015). This indicates that an organisation management has knowledge of its resources and assets that are specific and unique to their firm. With this knowledge and information, a company can match their abilities and resources in order to attain competitiveness in the market (Barney & Hesterly, 2015).
Secondly, identifying organisations’ competitive resources enables an organisation’s management to easily evaluate the resources that are meant to achieve competitiveness (Albrecht et al.., 2015). In this regard, the management can frame strategies to help in maximising competitive advantage sources in a business. This therefore allows the management to combine various competencies appropriately to achieve competitiveness as well as enhanced organisational performance (West et al., 2015). For instance, through RBV approach, the management of an organisation can determine resources that can assist in creating competitive advantage like value rareness and competitive superiority (Kellermanns et al., 2016). Subsequently, this can enable management to deploy their non-substitutable and valuable resources more efficiently and effectively as compared to rivals. According to Johnson et al. (2017), the identification of these competitive advantages can enable an organisation’s management to implement their strategies of business effectively. Notably, management will be in a position to implement their strategies effectively since they will be aware of their competitive advantage sources. Identification of these competitive advantages will also enable managers to build strong partnerships in order to achieve competitive advantages (West et al., 2015). For instance, Compass group competitive advantage is that of making strategic acquisitions which add to the growth of the company. This is evident from some of the successful strategical acquisitions which include: Travellers Fare, Feedr, Regency purchasing group, among others. Additional, competitive advantage of Compass Group also lies in its ability to venture into emerging markets which are fully exploited and which are associated with higher profit margins, thus giving the company an edge over its competitors.
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